When tastes over current and future consumption are characterized by Cobb-Douglas utility functions, a borrower who has no income now and all income in the future will borrow more when the interest rate falls.
Answer the following statement true (T) or false (F)
True
Rationale: When the interest rate falls, the substitution effect tells us to borrow less while the wealth effect tells us to borrow more. For Cobb-Douglas tastes, these effects are exactly offsetting on the "future consumption" axis -- which implies that current consumption increases (because more can be borrowed under the lower interest rate while keeping future consumption constant.)
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A. by small annual increases in demand. B. as an exception to the law of supply. C. in terms of a stable supply curve and increasing demand. D. in terms of a stable demand curve and increasing supply.
For lock-in to be an effective competitive strategy, a firm must successfully raid the customer base of competing firms on a regular basis
Indicate whether the statement is true or false
A firm that minimizes average cost will not survive in the long run
a. True b. False
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a. is a sales tax on the purchase of a particular good or service. b. is a tax on the profits earned from the sale of an asset. c. represents a surcharge on corporate profits beyond the normal corporate tax rate. d. is a tax on income-earning rental property.